How to Sell a House at Auction – UK Ultimate Guide (2023)
Selling at auction is a unique market with different buyer psychology and expectations, so understanding this market is key to a successful sale. This guide is intended to help you do just that. Between 2-3% of UK properties are sold at auction each year, making this a niche and specialist process. We crafted this ‘UK Ultimate Guide’, drawing on our hands-on experience to cut through the noise and provide clear, expert advice.
At Hammered our mission is to make it simple for anyone to buy or sell profitably at auction. We help you get the best value for your property, for free. Get started with our free auction valuation, or call us directly.
Without further ado, let’s get started.
Introduction: Why sell at auction?
Auctions have become an attractive option for many sellers in the UK. Understanding the pros and cons of selling a house by auction thoroughly is essential. Here are the key aspects to consider:
Benefits of Selling at Auction
- Speed and efficiency: If time is of the essence, selling at auction might be the right route. With fixed timelines, the entire process is completed within weeks.
- Certainty of sale: The auction environment removes the uncertainty found in private sales. Once the property is declared sold, the buyer is legally committed, ensuring that the seller can move forward with confidence.
- Competitive bidding environment: The bidding process can lead to a higher final sale price, with competition among buyers working in the seller’s favour.
- Transparency: The entire process is conducted in the open, providing clarity and reassurance to all parties involved.
However, it’s essential to consider the drawbacks such as upfront costs, no guaranteed sale, and lowish control over the final price. These factors might influence your decision, depending on your circumstances and needs.
This is where Hammered comes in. We help sellers minimise drawbacks, and maximise the chance of a successful, profitable sale. Here’s how.
Reasons why houses go to auction in the UK
The reasons why houses go to auction are diverse, but broadly fall into six categories:
1. The seller wants a quick and easy sale – these are circumstances where speed is the driving factor.
2. Bank repossession sales – the main requirement for Banks and asset managers selling at auction is the transparency of the process and the sale.
3. Probate sales – these are often handled at auction since the process is transparent, and most beneficiaries view the process as fair.
4. Company liquidation – for these sales the transparency of the process is crucial, as receivers are personally liable in these transactions.
5. Public bodies – Local authorities, housing associations, and other public bodies require a public and transparent platform to sell in an open and unfettered environment.
6. The weird and wonderful – these are properties which are hard to value, such as Castles, underground tunnels or a seafort in the British Channel.
If you fall into one of these six categories, chances are auction will be a good place to sell your property.
Section 1: Understanding the Auction Process
1.1 Auction Selection and Legal Steps
Choosing the Best Auction House:
This is perhaps the most strategic aspect of selling at auction. It’s also the one that requires the most market knowledge and experience to navigate. At Hammered these are the top three factors that feed into our decision on which auction house to choose for any given property:
- Track Record Matters: It’s essential to examine the auction house’s recent sales, focusing on their handling and selling of the property type you want to list, and identifying those outperforming national suppliers.
- Know Your Audience: Understand whether your property’s location attracts local, national, or international buyers, and choose between local and national operators accordingly.
- Quality of Marketing: Evaluate how visible the property is on the auction house’s website, as well as on platforms like Rightmove and Zoopla and assess the ease of use of their website, such as downloading the legal packet.
Our Insiders Guide to the London Auction Houses will also help you choose between them. If you are considering listing in an auction house outside of London, get in touch for our personal recommendations.
Selecting an auction-savvy solicitor:
Solid legal counsel is the cornerstone of a successful sale, and it is vital your solicitor is experienced in auctions. Auctions are nuanced, subject to tight deadlines. Look for a solicitor who has:
1) A track record of successful transactions
2) Solid understanding of auction deadlines
3) Capacity to react quickly
To make things easier, we’ve compiled this of the Top 30 Property Auction Solicitors, to help you choose.
Understanding your Properties Value:
The value of your property at auction is influenced by multiple factors. While it may be tempting to rely solely on the valuation an auctioneer gives you, caution is advised. Auction houses may be incentivized to forecast an inflated price to entice you to list with them, potentially leading to a misalignment of interests.
To obtain a more impartial estimate of your property’s auction value, you can take advantage of our independent and free auction valuation service. 👉
Pricing the Property: How the reserve and guide price are set
A low reserve price can spark keen interest and drive bids up due to heightened competition. While the reserve price is made by agreement and with the auctioneer, this minimum acceptable price requires careful consideration. Although auctioneers provide valuable insights, sellers benefit from independent advice, ensuring a balanced view on market trends and potential pricing strategies.
A guide price by comparison, is required by law to be set within 10% of the reserve price. It is meant to be representative of the likely final sale price. But how accurate are guide prices?
According to EIG, the average final sale price for residential properties in the UK is 14% above the guide price.
Cost of Selling a House at Auction in the UK
When considering the cost of selling a house at auction, it’s crucial to factor in various components. Here’s an overview:
1. Auction House Fees:
- Commission: Generally, the cost of auctioning a property includes a commission fee, typically between 1.5% to 3% of the final hammer price.
- Entry fees: These are charges to feature your property in auction catalogues, often ranging from £500 to £1500.
2. Legal Costs:
- The legal intricacies of selling at auction require professional expertise, with costs typically spanning £1,000 to £2,000, and possibly more depending on complexity of the sale and property.
3. Ancillary Costs:
- New leases: If you’re auctioning a leasehold property, extending the lease can be a pivotal selling point, though it might come at a significant price.
- Architectural plans: For development-ready properties, showcasing potential through plans can incur costs between £1,000 and £5,000.
- Surveys: These optional evaluations, often requested by potential buyers, can vary from £250 to £1,000.
A number of these costs are recoverable if the property fails to sell at auction. At Hammered we have the inside track on how to minimise upfront costs. So get in touch if you’re looking for the inside scoop.
1.3 Contract Considerations
Contractual Obligations with the Auction House
Before signing a contract with an auction house, review the top three essential terms that define the obligations and expectations. Approach these terms with careful attention and understanding:
1. Minimum Periods: Contracts with auction houses often stipulate minimum periods for different actions, such as your obligation to provide the legal pack. This ensures that the necessary legal documents are ready well in advance of the auction. Failure to meet these deadlines can lead to penalties.
2. Withdrawal Fees: If a seller decides to withdraw the property from the auction after committing, there may be withdrawal fees involved. These fees can be significant, depending on the agreement with the auction house.
3. Potential Penalties: Penalties may be incurred for various breaches of contract, such as not providing the legal pack within the required time. These can be monetary or may involve other consequences, depending on the specific terms of the agreement.
Get in touch with us for a broader list of items to watch out for in auction house contracts.
1.4 Pre-Auction Marketing & Strategy
Your chosen solicitor will create the Legal Pack, a vital document similar to a property’s health check. Its content can influence buyer interest and must be carefully considered. This pack, costing between £700-£1,000, is freely available to potential buyers and is one of the few initial costs when selling at auction.
Once you appoint an auction house and provide materials like photographs and Legal Pack, the marketing becomes their responsibility. Choosing the right auction house is vital for the sale’s success. At Hammered we ensure properties are marketed correctly, managing this essential process directly rather than leaving this to chance.
The common belief that staging a property is essential for a successful auction sale is a misconception. Promoted by brands like Zoopla, this misunderstanding ignores the unique psychology of auction buyers, differing from traditional sales. Surprisingly, staging often backfires. It’s advised to avoid any preparatory work or staging and consult a specialist on the appearance.
Section 2: Managing Existing Relationships
2.1 Dealing with Tenants and Agents
If you have existing tenants, the auction house will deal directly with the agent to coordinate any necessary arrangements with the current tenants. This includes ensuring that the tenants are aware of the auction process and any potential changes that may occur if the property is sold.
2.2 Viewing Process
Typically, the auction house takes on the responsibility of coordinating and conducting the viewings. They have their own team of professionals who handle the logistics, ensuring that potential buyers can visit the property at convenient times.
Section 3: Navigating Misconceptions
3.1 Misconceptions and Reality
1. Believing that sharing too much information about a property is beneficial:
It is often mistakenly believed that providing excessive details about a property will attract more buyers. However, many seasoned sellers find that revealing too much information can actually negatively impact the auction process.
2. Assuming that staging a property nicely will lead to higher bids:
While staging a property can enhance its appeal, the hosts mention that sometimes a run-down property can be seen as an opportunity and attract more buyers.
Everything is a balance.
These two points are just a couple of a multitude of misconceptions for first-time sellers. Make sure to study our Auction Academy, and approach the space with a beginner’s mind. It’s a different ball-game to agent-led property sales.
Section 4: The Auction Day and Beyond
4.1 Auction Day
What to Expect: What happens on auction day from the seller’s perspective.
The night before the auction Hammered co-founder Piotr Rusinek’s usual advice to ‘have a glass of whiskey’ and relax. He explains that everything has been decided at this point, and it’s now just a matter of basic and technical things playing out. He advises sellers to leave things in the capable hands of the auction and watch the auction online.
Bidding Dynamics: How most bidding action happens at the end.
Remember, most bidding happens at the end of an auction because buyers are typically waiting to see if anyone else will make a higher bid. They want to avoid driving up the price too early or getting caught up in a bidding war. By waiting until the last few minutes or even seconds, buyers can assess the competition and make a strategic bid to secure the property.
4.2 Post-Auction Process
From Sale to Completion:
After the property is auctioned, the auction house will finalize a memorandum of sale. Within the subsequent 48 hours, they will forward the contracts and deposits to the respective solicitors. Following this, the solicitors will initiate discussions regarding the completion, which usually occurs within a 4-week timeframe.
Potential Pitfalls: Issues that might arise post-auction
One of the most common pitfalls post auction is the buyer’s inability to complete the purchase. This could happen due to various reasons such as financial difficulties or the buyer seeking to renegotiate the terms.
Sellers might then find themselves assessing other post-auction offers or contemplating a relist in a future auction. The silver lining? Legally, the buyer must compensate for any financial gap if the property sells at a price below their bid.
In essence, once a bid exceeds the reserve price, your property’s sale is assured.
4.3 Role of Solicitors and Auctioneers
During this process, it’s important for both the buyer and seller to rely on their respective legal representatives. The ability to address any post-auction requirements with agility and assurance is predominantly why one should invest time in choosing the right legal firm and property auction.
Section 5: Post-Auction Options (If Not Sold)
With nearly 30% of properties receiving no bids at auction, it’s crucial to be prepared for this outcome. It’s important to note, many of the reasons properties fail to sell are entirely avoidable. To familiarise yourself with them, read our Top 9 Reasons Why Properties Fail to Sell at Auction.
Should your property not get sold, there are still effective avenues to consider:
5.1 Estate Agent: A Second Look
Estate agents offer another opportunity to showcase your property on the market, potentially connecting you with interested buyers.
5.2 Quick Buying Property Company: Efficient Offers
These companies provide prompt cash offers, albeit usually at a steep discount. Ideal for those seeking a speedy transaction at a reduced price. Re-listing at auction is usually advised before this method, time-allowing.
5.3 Private Buyer: Potential Direct Sale
Occasionally, direct outreach from neighbours or investors can lead to a sale. This method might be slower and less predictable, but it’s worth being open to the possibility.
5.4 Re-auctioning with Expertise
Consider re-auctioning, especially under expert guidance like that of Hammered, to enhance your chances of a successful sale in a more favourable auction environment.
For a more in depth look, read our Guide to: What Happens if a Property Doesn’t Sell at Auction.
Section 6: Testimonials and Case Studies
Mastering how to sell a house at auction turned these challenging scenarios into triumphant victories; read their stories.
1. Learn how Fi transformed a challenging investment into an £80,000 profit by choosing the auction route after traditional sales approaches failed. Read more.
2. After a decade-long attempt to sell his Elephant & Castle property, Henry successfully auctioned it off in just 18 days for £775,000. Read more.
3. Through seeking auction advice Charlotte in mitigated a looming £860,000 debt, safeguarding her Central London property. Read more.
A Final Word on Selling a House at Auction
Over the course of this comprehensive guide, we’ve delved deep into the intricacies of selling a house at auction in the UK. From weighing the pros and cons of auction sales, understanding the myriad reasons that drive property owners to the auction block, to grasping the nuanced steps involved in the auction process, and preparing for the potential aftermath—both the highs of a successful sale and the contingencies of a no-sale.
At the heart of it, selling at auction presents an exciting and potentially profitable avenue for those looking for a quick, transparent, and competitive route to sale. It’s a method that has a different rhythm and pulse compared to traditional property sales, demanding due diligence, the right expertise, and a bit of steely nerve.
Now, as we reach the end of our journey, here are some concluding thoughts to keep in mind:
1. The Auction Method is Valid: Even though only a fraction of UK properties are sold through auctions, the method is powerful. The sense of immediacy and competitive nature can lead to remarkable outcomes.
2. Knowledge is Power: The more you know and understand about the process, the better positioned you’ll be to make informed decisions. Be aware of the potential pitfalls, but don’t let them deter you.
3. The Right Support is Essential: Whether it’s choosing the ideal auction house, picking an experienced solicitor, or setting the perfect reserve price, having a knowledgeable team or partner like Hammered by your side can make all the difference.
So, if you’re considering this route, approach it with optimism, arm yourself with information, and surround yourself with the right professionals. The world of auctions awaits, promising both excitement and opportunity.
Dive in with confidence and may the bids always be in your favour.
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